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Financials Gone Wild


Are we seriously supposed to believe that the banks' discount-window escapade and the BAC, CFC "investment" are two separate events that just happened to take place the same day?

I did not think I'd find myself this jaded after nearly two months of vacation, but in light of Bank of America's (BAC) $2 bln dollar "investment" in Countrywide Financial (CFC), the made-for-Wall Street TV special of yesterday's backslapping "man-I-haven't-seen-you-since-that-football-game-tailgate-12-years-ago, how-u-doin' pal?!" get-together at the discount window by JP Morgan (JPM), BAC, Citi (C), and Wachovia (WB) has suddenly morphed into a wobbling home movie of four trick-or-treaters just happening to stumble upon Boom-Boom's doorstep and collecting $2 bln of fresh "trading crack".

In the likely event you have no idea of what I am talking about, let me rephrase it: are we seriously supposed to believe that the banks' discount-window escapade and the BAC/CFC "investment" are two separate events that just happened to take place the same day? Does anyone actually believe that Goldman Sachs (GS) did not bail out from the abyss its Global Equities Opportunity Fund? Or that the housing market is undergoing a healthy correction, perhaps?
I have not mystically received any super-secret investment idea from the "bizarro-world" events of the last 24 hours except the following rant: if the "difference between intervention and manipulation is communication", Boom Boom & Co. have now officially transferred their operations from the trading rooms to the "boiler room". If history has taught us anything, especially in the U.S., it's that once we come clean and accept that we have a serious problem, American ingenuity has always found a solid solution to it. Alas, the financial wannabe puppeteers apparently have come to believe (or more deceivingly – have deliberately concluded) that the economy and our financial lives are but limp rags hanging from their strings, and we can be duped without even masking their evil acts behind some decrepit facade.
Let me spell it out in a bit of grainier financial jargon: the "Greenspan put", that mythical "security" that in a highly, but not insanely, leveraged world could prevent the wheels of finance from coming unglued, has long been cashed in. Credit markets are unraveling because millions of people saw the doors to "Monopoly Town" being slammed wide open by Greenspan and Co., and convinced themselves that there was nothing wrong in engaging in a few years of "property flipping" with other-people's-money.

If we conservatively assume that 4 mln homes should never have been built, let alone sold at an average price of $250k each, that's $1,000,000,000,000 (1 trln) of misallocated/wasted debt. There is no "Greenspan", "Bernanke", or "Dodd" "put" for that. Our financial system is in bad shape. Bernanke and his like are trying desperately to keep the crowds from leaving en-masse their pathetic burning theater before they can safely park their own political "arses" outside the door. But the smoke is getting thicker by the minute.

"Minyan, don't be a hero, don't be a fool with your (financial) life."
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Position in GS, IAI
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